LONDON Nov 19 Britain's financial regulator
will start a root and branch review early next year of whether
wholesale markets used by banks, fund managers and exchanges are
"This will be a wide-ranging piece of work and, as part of
it, we will be inviting market participants to tell us where
they currently encounter issues," David Lawton, director of
markets at the Financial Conduct Authority, said on Tuesday.
The FCA was launched in April with a mission to protect
consumers better after a string of mis-selling scandals left
them out of pocket.
Lawton outlined how the new watchdog will also change the
way it supervises wholesale markets after the scandal over the
rigging of Libor benchmark interest rates by banks.
The FCA will use new competition powers to make changes in
the way these markets operate. Wholesale financial markets cover
stock exchanges as well as bond and derivative trading by banks,
brokers and asset managers.
"We believe this work will be an important step forward in
using the competition objective to bring about better outcomes
for consumers and market integrity in the wholesale markets,"
Lawton told an FCA conference on markets.
One issue the FCA expects to crop up in the review is the
price exchanges charge for their data on share trading.
Big asset managers have complained at having to pay a
plethora of exchanges for their data to obtain a pan-European
snapshot of the market and check if they are getting the best
Another issue is co-location or where exchanges offer a
premium service to participants who are allowed to place their
computer servers next to the exchange to get the fastest trading
Some investors view this as a two-tier market that creates
Over the next five years, the watchdog expects to be using
its competition powers in the wholesale market as actively as it
will be in the retail market, an FCA official said.
The FCA can generate structural changes in the market to
increase competition by issuing new rules and guidance, curbing
what firms can do and take enforcement action.